European stocks rising as euro pares gains

Thursday 08.57 BST

What you need to know

  • European equities rising
  • Euro slips after hitting eight-year high against sterling
  • Brent oil holds on to gains
  • Hong Kong stocks rise, defying Wall Street dip, as typhoon departs

Overview

European equities are rising despite yesterday’s Wall Street slide. The FTSE 100 is up 0.3 per cent in early trading, with the Xetra Dax rising 0.1 per cent and the Stoxx 600 gaining 0.2 per cent.

Wall Street’s Wednesday dip came after Donald Trump commented on the possibility of a government shutdown.

The S&P 500 shed 0.4 per cent on Wednesday following Mr Trump’s pledge to build a wall along the border with Mexico even “if we have to close down our government” by blocking spending approvals.

The euro is down from yesterday’s eight-year high against sterling, but is holding just above £0.92, as the eurozone’s improving economy buoys the bloc.

Investors await the start of the Jackson Hole symposium later today, with European Central Bank president Mario Draghi and US Federal Reserve chair Janet Yellen both set to speak on Friday.

Markets await indications about the future path of both central banks’ monetary policy, with the ECB mulling when to scale back its bond-buying stimulus programme and the Fed contemplating a hike in interest rates.

Leading Quote

The euro’s strength will be weighing on Mr Draghi’s mind as he prepares to address central bankers, says Andrew Pease, global head of investment strategy at Russell Investments.

“Everyone is watching for indications about the pace of tapering, and the euro strengthening biases towards the dovish side — which is a nice contrast to Mr Draghi’s comments at Sintra earlier this summer, when he was talking about inflation and sounding hawkish,” Mr Pease says.

“We are increasing our exposure to the euro, as we still think it has got a bit of a way to go. What will prevent it from reaching parity with sterling will be the ECB, for whom euro strength poses a complication in unwinding QE. The ECB is likely to opt for a gradual tapering as Mr Draghi does not want to scare the horses.”

Equities

Trading has resumed in Hong Kong after the city’s exchange cancelled Wednesday’s trading as Typhoon Hato battered the territory.

The Hang Seng is up 0.5 per cent with the information technology sector and financials gaining.

Macau casino stocks have slipped as analysts said disruption caused by Hato could impact gaming revenue.

In Japan the Topix index is 0.5 per cent lower as information technology stocks slipped, while energy stocks strengthen.

Australia’s S&P/ASX is up 0.1 per cent as earnings season continues.

Forex

The euro is trading below Wednesday’s eight-year high against the pound, when it hit £0.9236. In early European trading the euro is testing the £0.92 level, at £0.9206.

The single currency is 0.1 per cent down against the dollar at $1.1791.

The dollar index, which measures the greenback against a basket of peers, is 0.2 per cent stronger at 93.328, clawing back from a 0.4 per cent fall in the previous session.

The Japanese yen is 0.3 per cent weaker at ¥109.3 per dollar.

Fixed income

The yield on the 10-year US Treasury, which moves inversely to price, is up 1 basis point at 2.1834 per cent.

Commodities

Oil prices are largely holding on to gains after Brent crude settled 1.4 per cent higher on Wednesday as the Energy Information Administration said US crude stockpiles fell by 3.3m barrels last week.

Brent is trading at $52.50 a barrel, down 0.1 per cent, while West Texas Intermediate is down 0.2 per cent at $48.32 a barrel.

Gold is 0.2 per cent lower at $1,287.27.

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